State of Madhya Pradesh Vs. Ranojirao
Shinde & ANR  INSC 73 (21 March 1968)
21/03/1968 HEGDE, K.S.
HIDAYATULLAH, M. (CJ) BACHAWAT, R.S.
CITATION: 1968 AIR 1053 1968 SCR (3) 489
CITATOR INFO :
R 1970 SC 564 (55,97,112,176) R 1970 SC1292
(10) RF 1971 SC 530 (54,329) RF 1971 SC1409 (33) RF 1973 SC1461 (12,19) RF 1974
SC2364 (4) D 1975 SC1058 (8) RF 1977 SC1361 (192) R 1978 SC 597 (58) O 1978 SC
803 (30,31,32,33,34,37) RF 1986 SC1126 (48) RF 1989 SC1741 (10)
Constitution of India, Arts, 19(1)(f), (5)
and 31-Enactment abolishing cash grant-If violative of Art. 19(1)(f) and
31(2)-Choses in action and money, if could be acquired under Art. 31(2).
Madhya Pradesh Abolition of Cash Grants Act
(M.P. 16 of 1963)-If violates Art. 19(1)(f) or Art. 31(2) of the Constitution.
The appellant-State abolished by an executive
order cash grants payable by it. This order was quashed by this Court.
Thereupon the State passed the Madhya Pradesh
Abolition of Cash Grants Act, 1963 to abolish the cash grants, but provided for
the payment of certain compensation to the grantees-respondents. the
respondents challenged the vires of the Act before the High Court. The High
Court held the Act to be ultra vires of Art. 19(1) (f) of the Constitution and
not saved by sub-Art. (5) thereof. In appeals by certificate, this Court,
HELD: The Act is either violative of 31(2)
or, in the alternative, Art. 19(1) (f) of the Constitution. [490 F] Choses in
action and money could not be acquired under Art.
31(2). If it is held that State by the
exercise of its power of eminent domain can acquire choses in action and money
belonging to its citizens, by paying a fraction of the money taken as
compensation, the fundamental right guaranteed under Art. 19(1)(f) would be
deprived of all its contents and that Article will cease to have any meaningful
purpose. Article 31(2) must be construed harmoniously with Art. 19(1) (f). If
so construed, it is obvious that the public purpose contemplated by the Article
does not include enrichment of the coffers of the State. Further the
compensation referred to in Art. 31(2) is the just equivalent of the value of
the property taken. [495 E-H] A law which authorises the State to deprive a
person of his property must be a valid law. it must not violate Art. 19(1) (f)
which means that it must satisfy the requirements of Art. 19(5). The word
"law" used in-Art. 31(1) indicates its limitations and refers back to
Art. 19 and any law made under Art. 31(1) can be sustained only if the
restrictions it impose& are reasonable and in the interest of general
public. The Act which empowers the State to appropriate someone else'&
property for itself solely with a view to augment the resources of the State
cannot be considered as a reasonable restriction-in the interest of the general
public.., If Art. 19(5) is interpreted to mean that the State can take by
authority of law anyone's property for the purpose of increasing its assets or
revenues, the guarantee given by Art. 19(1)(f) would become illusory (496 -497
E] Madhorao Phalke v. State of Madhya Bharat  1 S.C.R.
957, Kameshwar Prasad v. State of Bihar ,
A.I.R. 1962 S.C.
1166, State of Bihar v. Kameshwar Singh,
 S.C.R. 889, Kavalappara Kottarathil' Kochuni v. State of Madras', 
3 -S.C.R. 887, followed.
Bombay Dyeing and Manufacturing Co. Ltd. v.
Stat of Bombay,  S.C.R. 1122, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 1730 and 1731 of 1966.
Appeals from the judgment and order dated
August 18, 1964 of the Madhya Pradesh High Court in Misc. Petition Nos. 21 and
22 of 1963 (G.).
I. N. Shroff, for the appellant (in both the
B. Sin, P. W. Sahasrabuddhe, S. K. Dholakia
and A. G. Ratnaparkhi, for the respondent (in both the appeals).
The Judgment of the Court was delivered by
Hegde, J. In these connected appeals by certificates the question that arises
for decision is whether the Madhya Pradesh Abolition of Cash Grants Act of 1963
(Act No. XVI of 1963) is ultra vires the provisions of the Constitution.
The respondents in these appeals were
entitled to receive cash grants from the Government of Madhya Pradesh. The
impugned Act abolished such grants but provided for the payment of certain
compensation to the grantees. The respondents challenged the vires of the Act
before the High Court of Madhya Pradesh in Miscellaneous Petitions Nos. 21 and
22 of 1963, on various grounds. The High Court rejected all the contentions
advanced on behalf of the respondents excepting one, namely that the Act is
ultra vires of Art.
19(1) (f) of the Constitution and is not
saved by sub-Art.
(5) thereof. After obtaining from the High
Court Certificates under Art. 133(1)(c), the State of Madhya Pradesh has filed
these appeals. The State is challenging the correctness of the decision of the
High Court to the extent it went against it. The respondents on their part, in
addition to supporting the findings of the High Court which are in their
favour, relied also on the other pleas taken by them before the High Court. As
we are of the opinion that the impugned Act is either violative of Art.
31(2) or, in the alternative, Art. 19(1) (f)
of the Constitution, we have not thought it necessary to go into the other
contentions taken on behalf of the respondents.
Before the impugned Act was enacted, the
State of Madhya Bharat which forms part of the new State of Madhya Pradesh,
purported to abolish -the cash grants payable by it by means of an executive
order. That order was unsuccessfully challenged by Madhorao Phalke and others
before the High Court. But in appeal this Court in Madhorao Phalke v. State of
Madhya Bharat(') quashed the order in question, holding that the grants in
question were recognised by the kalambandis of 1912 and 1935 issued by the
Rulers of Gwalior and those' kalambandis are existing laws within the meaning
of Art. 372 of the Constitution and consequently the same could not be
abrogated by means of an executive order. It may be noted that in that appeal,
the appellant challenged (1)  1 S.C.R.957.
491 the order in question on two grounds,
namely- (1) that as his right to receive the cash grant had been statutorily
recognised by the State of Gwalior, it was not open to the Government of Madhya
Bharat to exiting that right merely by an executive order, and (2) that that
right being property the same could not be divested ,without payment of
compensation under Art 31 of the Constitution. This Court allowed the appeal on
the first ground and consequently it did not deal with the second. After the
decision of this Court in that case, the impugned Act was enacted by the Madhya
Pradesh legislature on April, 5, 1963. It received the assent of the President
on July 25, 1963 and was published in the Madhya Pradesh Gazette Extraordinary
on August 2, 1963. The Act comes into force on such date as the Government may
by notification appoint. Even before that notification was issued, the
petitions from which these appeals arise were instituted in the High Court. We
are given to understand that in view of those petitions, the Act has' yet been
brought into force.
The long title of the Act says that it is an
Act to provide for the discontinuance of cash grants in Madhya Pradesh and to
make provisions for other matters connected therewith.
It contains twelve sections. Section 11 sets
out their short title, extent and commencement of the Act. Section 2 defines
some, of the expressions found in the Act. Section 3 is the most important
section. it purports to abolish certain cash grants. Section 4 provides for
statement of claims by the grantees. Section 5 provides the manner of
determining the compensation payable. Section 6 prescribes that appeal,
revision and review under the Act to be in accordance with Madhya Pradesh Act
No. 20 of 1959. Section 7 provides for the determination of disputes as regards
the title of any grantee. Section 8 bars the jurisdiction of civil courts to
issue an injunction against any person in respect of any proceedings pending
before the competent authority under s. 5 which shall have the effect of
staying the proceedings. Section 9 prescribes the quantum of compensation
payable. Section 10 deals with the mode of payment of compensation. Section 1 1
empowers the State Government to make rules for carrying out all or any of the
purpose of the Act. Section 12 says that if any difficulty arises in giving
effect to the provisions of -the Act, the 'State Government May by order make
such provisions not inconsistent with the purposes Of this Act as appears to be
necessary or expedient for removing the difficulty.
In these aPpeals we are mainly conceded with
the vires of s. 3 read with the definition of "cash grant" in s.
2(1).If section 3 read with s. 2(1) is held to be ultra vires of the
Constitution, then the whole Act falls to the ground the remaining sections of
the Act are merely subsidiary or incidental provisions. Section L7Sup.C.1/68-7
492 3:(*) provides that notwithstanding anything' contained in any law custom,
usage, sanad or a decree or order of a court or other authority whatsoever, all
cash grants shall be discontinued and cease to have effect from the
commencement of this Act. But the pro thereto makes certain exceptions with
which we am not -concerned in this case. The case of the respondents falls
within the main-part. They do not have the benefit of the proviso A cash grant
as defined in S. 2(1) (**) includes a grant of -----------------------------
"3. Abolition of certain cash grants-(1) Notwithstanding anything
contained in any law, custom, usage, sanad or a decree or order of a court or
other authority whatsoever, all cash grants shall be discontinued and cease to
have effect from the commencement of this Act :
Provided that where the grantee is a person
specified in column (1) of the Table below the cash grant may, at the option of
the grantee exercised in such manner, within such period and in such form as
may be prescribed, be continued subject to the conditions and during the period
mentioned in the corresponding entry in column (2) of the said Table.
------------------------------------------------------------- (1) (2)
------------------------------------------------------------- (i) A widow . . .
So long as she remains a widow.
(ii) A minor (a) in the case of a male . Till
the date he attains 21 years of age.
(b) in the case of a female Till the date of
her marriage or till she attains 21 years of age, which ever is earlier.
(iii) A Person above the age of 60 years
During his life time.
(iv)A person subject to phys- ical disability
or mental in- During his life time.
firmety owing to which he is incapable of
earning his livelihood.
(2) Upon the discontinuance - of a cash grant
under sub- section (I not be, obligatory on the grantee to perform the function
or discharge t any attached to such grant".
(**) "2(1)-Cash grant' means a grant of
money which is enforceable by the grantee against the State Government on the
date -of the coming into force of this Act but does not include- (i) a grant of
money for- (a) services of Public temples, mosque or church; or (b) worship of
public temples, mosque or church; or (c) public temples;
(ii)a grant of money to charitable or
(iii)a grant of money or Pension or annuity
or special or Perpetual annuity sanctioned under- (a) S. 5.of the Central
Provinces and Berar Revocation of land Revenue Exemptions Act, 1948 (XXXVII of
(b) S. 77 or S. 81-A of the Madhya Pradesh
Abolition of Proprietary Rights (Estates, Mahals Alienated Lands) Act, 1950 (1
(c) S. 41 of the Vindhya Pradesh Abolition of
Jagirs and Land Reforms Act, 1952 (XI of 1952);
(d) the orders relating to Jagirs in Bhopal'
'Ihekam Khusravi, 1949, para 30 read with s.-45-A of the Bhopal Abolition of
Jagirs and Land Reforms Act, 1953 (No. X of 1953); and (e) sub.S. (2) of S. 160
of the Madhya Pradesh Land Revenue Code, 1959, (20 of 1959);" 493 money
which is enforceable by the grantee against the State Government on the date of
the coming into force of the Act but does This not include those ,,rants which
are specifically excluded. definition takes in all the cash grants whatever may
be the nature or origin of those grants.
The definitiOn of a cash grant is wide enough
to include cash grants sanctioned by ex-Rulers in lieu of Jagirs or other
properties resumed or even, en payments agreed to be made in lieu of loans
given to the Rulers. Different considerations may arise if the grants abolished
are Gratuitous payments, grants in lieu of services to be rendered or other
resumable grants. But as mentioned earlier, the definition of cash grants in s.
2(1) does not make, any distinction between the various types of cash grants.
Hence, the said definition will have to stand or fall as a whole, there being
no basis for severing some out of the several grants included therein. It is
impermissible for this Court to rewrite that clause and confine the definition
only to such of the cash grants which the legislature might be competent to
The doctrine of severability is applicable
only if it is possible to separate the legal from the unconstitutional portion
of the Provision. If it is not possible to do so, the entire provision has to
be struck down as unconstitutional. see Kameshivar Prasad v. State of Bihar(').
The High Court has come to the conclusion
that a "cash grants is property within the meaning of that expression in
Articles 19(1)(f) and 31. This conclusion was not challenged before us. It is
obvious that a right to a sum of money is property.
There was controversy before the High Court
whether the abolition of cash grants under the Act can be considered as
acquisition under Art. 31 (2). It was urged before that Court on behalf of the
State that that abolition of cash grant amounted to compulsory acquisition of
property for public purpose and as the Act has prescribed the compensation
payable to grantees the acquisition in question is completely protected by Art.
31(2). The-High Court replied this contention opining that as the law in
question cannot be considered as having transferred the rights of the grantees
as provided in Art. 31 (2A) the State cannot seek the protection of Art. 31
(2). Ibis I conclusion is debatable,. It is possible to view the discontinuance
of the payment of cash grants under s. 3 as a statutory transfer of rights of
the grantees to the State. But there is no need to pursue this line' of
reasoning for reasons to be stated presently. Though the language of Art.31 (2)
prima facie comprehends movable properties including choses in action and money
there are valid grounds to hold that choses in action and money are outside the
reach of Art. 31 (2). In the United States of America, opinion is divided among
the (1) A.I.R. 1962 S.C. 1166.
494 jurists whether money and choses in
action can be acquired in the exercise of the power of eminent domain though
the preponderance of opinion appears to be that it is impermissible , But so
far as we are concerned, this question is concluded by the decisions of this
Court. In State of Bihar v. Kameshwar Singh(') this Court held that under Art.
31 (2) of the Constitution, money and choses in action could not be acquired.
Mahajan, (as he then was ), speaking for the majority -after quoting with
approval certain passages from Cooley's Constitutional Limitations observed (at
pp. 943 44 of the Report) "It was not necessary to decide in this case
whether under the compulsory acquisition power the State has the power to
acquire choses in action or money, but it cannot be seriously disputed that
such an acquisition amounts to a forced loan and that the desired result can be
more appositely obtained in, exercise of the police power of the State than of
the power of eminent domain or compulsory acquisitions of property and that
compensation in suc h a case is the same amount of money that is being taken
and in the case of a chose in action the amount of money that it would
produce.. In this situation it cannot be held that fifty per cent of the
outstanding arrears was compensation in any sense of that expression for is
acquisition. The true position is that the State tool over all the arrears and
decided to refund fifty per cent of them and forfeit the rest. The validity of
this acquisition has to be decided independently of the acquisition of the,
estates. It has no connection with land reform or with any public purpose It stands
on the same footing as- other debts due to zamindars or their other movable
properties, which it was not the object of the Act to acquire. As already
stated, the only purpose to support this acquisition is to raise revenue to pay
compensation to some of the zamindars whose estates are being taken. This
purpose does not fill within any definition, however wide, of the phrase public
purpose' and the law therefore to this extent is unconstitutional." In the
same case, Mukherjea,'J. (as he then was) observed:
"Taking money under the tight of eminent
domain when it must be compensated by money afterwards, could be nothing more
or less than a forced loan and it is difficult to say that it comes under the
head of acquisi- (1)  S.C.R. 889.
495 tion or requisitioning of property...and
is embraced within its ordinary connotation." Chandrasekhar Aiyar J., in
that very case held that though money and choses in action are movable property
and would prima facie come under the power of compulsory acquisition the power
under Art. 31 (2) could not be used to support such acquisition on the ground
that generally speaking there would be no public purpose, in their
acquisition". The majority view in that case was followed by this.-Court
-in Bombay Dyeing and Manufacturing Co Ltd. v. The State of Bombay('). That
lease considered the validity of S. 3 (1) of the Bombay Labour Welfare Fund Act
which provided that there should be constituted a fund called the' Bombay
Labour Welfare Fund and notwithstanding anything contained in any other law for
the time being in force, the same specified in sub-s. (2) thereof shall be paid
into the fund. Section 3 (2) provided inter alia:
"The Fund shall consist of (a) all fines
realised from the employees;
(b) all unpaid accumulation." The Court
held following the decision of this Court in State of Bihar v. Kameshwar
Singh(2) that the provision in question is invalid -and is not protected by
Art. 31 (2).
From the above decisions it follows that
-choses in action and money could not be acquired under Art. 31 (2). If it is
held that',, State by the exercise of its power of eminent domain can acquire
choses in action and money belonging 'to its citizens, by paying' a fraction of
the money taken as compensation, the fundamentals. right guaranteed under Art.
19(1)(f) would be deprived of all its
contents and that Article will cease to have any meaningful purpose. The power
conferred under Art'. 31 (2) is not a taxing power.
That power cannot be utilised for enriching
the coffers of the State. It is true that the abolition of the cash grants
would argument the resources of the State but that cannot be considered as a
public purpose under Art. 31 (2). If it is otherwise it would be permissible
for the legislatures to enact laws acquiring the public debts due from the
State, t he annuity deposits returnable by it and provident fund payable by it
by providing for the payment of some nominal compensation, to the persons whose
rights are acquired as the acquisitions in question would augment the resources
of the State. But nothing so bad can be said to be within contemplation of Art.
31(2). That Article must be construed harmoniously with Art. 19(1)(f). If so
construed, it is obviously that the public purpose contemplated by that Article
does not include enrichment of the coffers of the State. Further the
compensation referred to in Art. 31(2) is, as held by this Court in various (1)
 S.C.R. 1122.
(2) (1952) S.C.R. 889.
496 decisions, is the just equivalent of the
value of the property taken. If for every rupee acquired fifty paisas or less
is made -payable as compensation the violation of -Art.
31 (2) would be patent and in those
circumstances the exercise of the powers by the legislature would be considered
as a fraud on its powers and consequently the legislation 'will be struck down
as a colourable piece of legislation.
It is true that in State of Bihar v.
Kameshwar Singh() and in Bombay Dyeing and Manufacturing Co Limited v. State of
Bombay('), this Court was considering the question of taking of money 'by the
State that was in the hands of others, but in this case we are concerned with
the abrogation of the liability of the Government But we fail to see any
difference in principle in these two sets of cases. In the former case the Government
was compulsorily taking others' property and in the latter it seeks to
appropriate to itself the property of others which is in its hands.
It was next urged that the impugned Act, even
if it is held not to be protected by Art. 31(2) is still valid under Art.
31(1). The said Article says that no person
shall be deprived of his property save by authority of law. A law Which
authorises the State to, deprive a person of his property must be a valid law.
It must not violate Art.
19(1) (f) which means that it must satisfy
the requirements of Art. 19(5). In Kavalaopara Kottarathi Kochuni v. State of
Madras(-3) this Court laid down that the word "law" used by Art.
31(1) indicates its limitations and refers back to Art. 19 and any law made
under Art. 31 (1) can be sustained only if the restrictions it imposes are
reasonable and in the interest of the general public, The Act which empowers
the State to, appropriate someone else's property for itself solely with a view
to augment the resources of the State, cannot be considered as a reasonable
restriction- in the interest of the general public. That conclusion of ours
receives support from the ratio of the decisions of this Court in State of
Bihar v. Kameshwar Singh() and in Bombay Dyeing and Manufacturing Co. Limited
v. State of Bombay(2) wherein Venkatarama Aiyar, J. speaking for the Court,
observed "Assuming that the correct position is what the respondents
contend it is that the case falls within Art. 19(1)(f), the question that has
still to be determined is whether the impugned Act could be supported under
19(5). There was some discussion before us as
to the scope of this provision, the point of the debate being whether the words
'imposing reasonable restriction' (1)  S.C.R. 889. (2)  S.C.R.
(3)  3 S.C.R. 887.
497 would cover a legislation, which not
merely regulated the exercise of the rights guaranteed by Art. 19(1)(f) but
totally extinguished them, and whether a law like the present one which
deprived the owner of his properties could be held to fall within that
provision. It was argued that a law authorising the State to seize and destroy
diseased cattle, noxious drugs and the like, could not be brought within Art.
19(5) if the word 'restriction' was to be narrowly construed, and that
accordingly the power to restrict must be held to include, in appropriate
cases, the power to prohibit the exercise of the right. That view does find
support in the observations of Lord Porter in Commonwealth of Australia v. Bank
of New South Wales(') : but the present legislation cannot be sustained even on
the above interpretation of the word "restriction " as s. 3 ( 1 ) of
the Act deals with moneys and money cannot be likened to diseased cattle or
noxious drugs so as to attract the exercise of police power under Art. 19 (5).
It appears to us that whether we apply under Art. 31(2) or Art.
19(5), the impugned Act cannot be upheld and
it must be struck down." If Article 19(5) is interpreted to mean that
State can take by authority of law anyone's property for the. purpose of
increasing its assets or revenues, the guarantee given by Art. 19(1)(f) would
become illusory, a proposition to which this Court cannot subscribe.
For the reasons mentioned above we are unable
to uphold the validity of Madhya Pradesh Abolition of Cash Grants Act.
These appeals accordingly fail and are
dismissed with 'Costs with one set of hearing fee.
Y.P. Appeal dissmissed.
(1)  A.C. 235.